The vulnerability stems from improper output encoding in error handling:

1. The commit diff shows renderContext() in client.py originally used return '<strong>%s</strong>'%message without escaping
2. The message variable contained user-controlled template names from the HTTP request
3. The patch added cgi.escape() to sanitize the output, confirming the lack of escaping was the root cause
4. XSS occurs when attackers inject malicious payloads through the template parameter, which gets reflected in error messages
5. The exception handlers for NoTemplate and Unauthorised both needed escaping fixes, but only renderContext's HTML response path was directly exposed to external input